Sugar Reserve in India at Four-Year High Set to Help Exports

Exports for a third straight year from India, also the world’s second-biggest producer, may add to a global surplus and extend the 21 percent decline in futures in New York in the past year. Photographer: Prashanth Vishwanathan/Bloomberg

Aug. 8 (Bloomberg) -- The biggest sugar stockpile in India
in four years is set to help the world’s top consumer avert a
ban on exports as a drought threatens to cut output and stokes a
rally in domestic prices.

Inventories may jump to as much as 7 million metric tons by
Oct. 1, the most since 2009, as exports slow because of higher
domestic prices, said Vinay Kumar, managing director of the
National Federation of Cooperative Sugar Factories Ltd.
Shipments may total 3.5 million tons this crop season, less than
the 4 million tons estimated earlier, said Abinash Verma,
director general of the Indian Sugar Mills Association.

Exports for a third straight year from India, also the
world’s second-biggest producer, may add to a global surplus and
extend the 21 percent decline in futures in New York in the past
year. Supplies will top usage by 5.5 million tons in the
2012-2013 season that starts in October in most countries,
according to Morgan Stanley, which remains bearish on prices.

“There will be surplus available for exports next year as
stocks are going to be comfortable and production will not fall
below 25 million tons,” said Kiran Wadhwana, director at New
Delhi-based broker Comdex India Ltd., who’s traded sugar for 25
years. “Exports will depend on global prices and the rupee-dollar exchange rate.”

Raw sugar for October delivery fell 0.2 percent to 21.37
cents a pound on ICE Futures U.S. at 3:44 p.m. in Mumbai.
Futures gained 7.8 percent in July.

Crops Hurt

More than 50 percent of India faces the threat of a drought
after receiving below-average monsoon rains since June 1,
hurting crops from rice to cotton and oilseeds and cane. Sugar
futures in Mumbai rallied to a 19-month high on Aug. 4 on
speculation that the dry weather will lower production.

The government may restrict so-called free-sugar exports
and ban wheat shipments by private companies, a government
official told reporters in New Delhi yesterday, asking not to be
identified, citing policy. The country doesn’t need to curb
sugar exports as the rally in local prices has slowed shipments,
Farm Minister Sharad Pawar said in an interview yesterday.

“There may not be a sharp drop in output in the country
considering higher production in Uttar Pradesh and Tamil Nadu
will partly offset production loss in Karnataka and
Maharashtra,” the association’s Verma said.

‘Sufficient Sugar’

Maharashtra’s output will probably decline 22 percent to 7
million tons next year, Vijay Singhal, the state’s sugar
commissioner, said July 30. The harvest in Uttar Pradesh may
climb 10 percent to 7.6 million tons, according to Shyam Lal
Gupta, secretary of the Uttar Pradesh Sugar Mills Association.

The country’s output may fall to 25 million tons next
season from 26 million this year, according to the sugar mills
association. Still, India will have a surplus of about 2 million
tons to export next year, sugar federation’s Kumar said.

“There is sufficient sugar in the country to meet domestic
demand,” Kumar said. “There is no need to panic.”

The area under sugar climbed to 5.28 million hectares
(13.05 million acres) as of July 27 from 5.09 million hectares a
year earlier, according to the ministry of agriculture.

A revival in monsoon, which accounts for more than 70
percent of India’s annual rainfall, in the central and eastern
parts of the country will benefit rice, soybeans, cotton and
cane crops, the India Meteorological Department said yesterday.
Rainfall is 17 percent below average since June 1.